Enjoy your latte and retirement, too

In the country with dozens who have a variety of financial issues and target new customers a year and I met. Interestingly, this trade-off between the group of the most common statement I hear is about to buy a coffee. It goes like this:. “I bought a latte every morning I know I should not I really should invest the money instead of wasting it in the coffee I feel bad with money..”

This is fascinating, so many people believe that spending money on a daily coffee to achieve derail them from their financial goals. It will not.

In fact, this misconception point to a bigger problem with the way investors think their financial decisions. Many people are too focused on the procurement pinch pennies, but they often neglect the bigger money decisions. This is even more important is the right to obtain a large financial expenditure, and establish a strict process to save you.

Decision-making power to obtain large expenditure

Spend money on a cup of coffee, not a life-changing decisions every day, unless you are living paycheck to paycheck. However, taking too much debt to fund your lifestyle can be devastating. Where people overextend themselves some of the common areas, including education, housing, cars and credit cards.

Student Loans

According to the College Board, tuition 2019 – Average fees for the 2020 academic year private colleges and $ 36,880 state residents attending public universities outside of $ 26,820. These figures do not include room and board fees and school supplies, which can easily add additional $ 12,000 per year. In addition, some students go to graduate school, another large sum of money can be.

Education is an important part of the development of any people, but can not ignore the financial impact of such a decision is very important. This may make the university seem more than anything is for sale to the public is not so attractive, but the reality is that people should be on track to university life, in order to improve their earning potential, not a burden, they are a heavy debt burden. It’s not uncommon for me and a young couple who are successful, but met in debt $ 500,000. In some cases, these people will complete their retirement only a few years ago, to pay off their student loans.

If you decide at a university or counseling students who are in the application processRecommended one of the best works, you can give them is that they put their own education as an investment. Who bears too much debt repayment no game plan on how students may feel the negative financial impact of this decision rest of their lives. Thankfully, there are many excellent, cost-effective program of higher education, including in state schools, certificate courses at a community college spent a number of years, or engaged in the provision of financial assistance programs. Taking into account the students on these options will be put into orbit a great career, without having to re-start their lives burdened with a mountain of student loans.

Home Purchase

Similar to a higher educati, home ownership is the American dream romantic, everyone should pursue. According to Zillow, the listed price of the average family is $ 226,800, and it is possible that, based on multiple locations. Buying a home is the biggest purchase of many Americans, and should be carefully considered. In addition, like the down payment and transaction costs, potential buyers focused on the upfront cost, it is also important to bear in mind related to the running costs of homeownership.

In addition to mortgages and insurance, there are numerous costs to maintain a house when the inevitable thing to rest. To make sure your home purchase, you can actually afford this is a very important factor in these annual maintenance costs. In the meantime, what’s wrong w ^ i-th to rent or buy a small home longer to get into the market. It is better to take your time, this decision was not hasty “American Dream”, which may become his own personal nightmare.

Car rental or purchase

In addition to the family, and most importantly, one of the largest automobile acquisition of many families. According to auto information site Edmunds, the average price of a new car now tops more than $ thirty-six thousand seven hundred and eighteen. In addition, AAA study found that on average it costs about US $ 9282 per year to take into account the fuel, maintenance, insurance and borrowing costs when own a new vehicle.

This figure from $ 8,849 in 2018 taking into account the average American family is a maximum of two cars to make this decision even more pronounced. Fortunately, the date ERE There are many options when it comes to get the car to help manage costs. This includes the purchase of a used car, avoid luxury brands and do not get any type of full version. It is importantRemember, the ultimate goal is to make your car and your family from point A to point B. Thankfully, this is achievable without breaking the bank is very important.

Credit card debt

People each financial knowledge learned that credit card debt is a personal net worth of cancer. Debt grows exponentially and becomes increasingly difficult to manage. We have to use a credit card, including incentive programs, discounts, security measures, such as fraud protection, and build your credit score many legitimate interests. However, credit cards Bala NCES should be paid every month.

If you can not afford a project, and then use their credit card debt powerless is never the right approach. In August 2019, the St. Louis Fed found that the average credit card interest rate in the US is a staggering 16.97%. Using these mathematical work by high interest rates made it clear that debt levels will become insurmountable, and would lead to economic difficulties in a short period of time.

Automate Your Savings

“Paying yourself first” is often used in personal wealth management industry to emphasize the importance of regular savings phrase. Allocating a portion of their savings income first allows investors to prioritize their financial future, then focus on other goals.

Achieve long-term savings strategy is relatively easy to “rub.” Nudge, this is a Nobel Prize-winning economist Professor Richard Thaler and Sunstein Harvard Law School to promote the concept of behavior is affecting the way. This is done by making it easier for individuals to make certain decisions. A nudge example is when a company automatically enroll new employees into their 401 (k) plan. Employees can opt out of this arrangement any time, but, more often than not, employees of inertia will ensure that they contribute to their 401 (k) each paycheck.

Another automatic tuning upgrade a person’s annual savings rate. This feature allows employees who have not yet apricot their 401 (k) by the naturally come close to that goal LY increase the contribution of employees per year. Again, I hope one’s own idle will lead to their plans throughout their employment persist.

Finally, in an effort to ensure that the company plans to contribute to the prudent investment funds, the default investment options should be available. This is not to leave the background in personal financeTheir 401 (k) money sitting in cash or in the same bad plan participants who invest in inappropriate funds are quite common. The two popular option is the default target date funds balanced funds between employees based on age or stocks and bonds. While many professionals may point to a lack of custom or other defects with these investments, there is no doubt, either OPTIOñ eliminate their bad investment choice from, blow up their portfolios of complex investment decision-making process and prevent staff.

Avoid coffee daily purchases or other petty gimmicks may make great sound bites, but it does not own ability to achieve the financial goals of a meaningful impact. In fact, these small tolerance among investors should be cautious, because they make life more fun, without having to produce to encourage a significant impact on their financial situation.

Individuals should not spend more time focusing on making the right decisions on debt and build savings strategy. Doing so will allow investors are relieved that they can enjoy their daily latte and retire it!